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PostPosted: Tue Sep 24, 2013 5:49 pm 
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Much as we wish it were otherwise, we are none of us made of money and we can’t afford every little renovation we’d like to do to our houses. So you’ll want to figure out how much you can afford, how much your various renovation projects are, and then pick and choose wisely. Some projects are more imperative than others, and some can’t be completed before a different step is accomplished. But the limiting factor will most likely be money.

Loans should be below 28 percent of your income

How do you figure out how much you can afford? A good rule of thumb according to Horizon Bank, a banking institution that distributes mortgages, “Any loan you take out for remodeling [should] still allow you to keep your total monthly housing costs under 28 percent of your gross income.” Housing costs include private mortgage insurance, loan principle and interest, property taxes, and homeowner’s association dues. You should also consider how much total debt you have—school loans, car payments, credit cards, etc. Your total debt should generally remain below 36 percent of your gross annual income.

Websites provide free mortgage calculators

If you’re like me, figuring out those types of numbers are beyond what you can easily do with pen and paper. Luckily, there are many websites that offer free mortgage calculators for your convenience. They require you to enter the loan amount, the interest rate, and the number of years you have to pay off your loan. With this information, mortgage calculators can determine how much your monthly payment will be and how much of each payment goes towards principle or interest.

Get pre-approved before hiring a contractor

Horizon Bank also suggested that homeowners looking at renovating should “get pre-approved for a refinanced mortgage, home equity loan, or line of credit before [they] sign any paperwork with contractors or make decisions on project plans.” That way, if the loan process is more difficult than you thought, you don’t waste the time of a contractor waiting to get started on your home, though you might get quotes ahead of time so you know how much of a loan you’ll need. Interview a variety of contractors so you can get the best price for the quality of project you expect. One good idea is to get references from past clients or to visit the site of a home they are currently working on.

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